SEBON temporarily suspends public issue approvals amid market concerns

KATHMANDU: The Securities Board of Nepal (SEBON) has decided to halt the approval of public offerings in response to investor concerns about the oversupply of securities in the stock market, leading to a market decline. Board sources indicate that the board will cease granting approval for public offerings until it receives authorization from the board of directors.

The current practice involves the chairman of the board approving public offerings, but there is now a proposal in motion to transfer this authority solely to the board of directors. Consequently, initial public offerings (IPOs), equity shares, and follow-on public offerings (FPOs) have temporarily been put on hold.

This strategic pause is aimed at delaying public offerings as the market experiences a significant downward trend. The proposal is expected to be presented to the board for consideration in the coming days, following discussions within the management committee.

In the past month, only one IPO from a fundamentally strong company has been approved, and the approval of equity shares has been completely suspended. The board intends to promote book building by eliminating premiums even in primary public offerings.

However, Gopal Bhatt, a securities market expert, argues against the suspension of public offerings due to market oversupply. He suggests that in a competitive market, the regulatory body’s standards should be the determinant of whether a public offering proceeds, as market forces will naturally adjust the pricing based on supply and demand.

Bhatt emphasizes that the board should evaluate factors such as a company’s financial health, business operations, shareholder count, capital status, and net worth when deciding on a public offering. If all the board’s criteria are met, it would be inappropriate for the board to block the offering in a competitive market. He contends that only consistently unprofitable companies should be denied public offerings.

Dilip Munakarmi, an investor and securities market expert, criticizes the board’s decision to halt public offering approvals, labeling it a counterproductive measure. He advocates for strong regulation, fair pricing, and good governance as the keys to a brighter future for the capital market, investors, and businesses.

Amidst the debate and protests by some investors, 20 companies with a combined value of NPR 17.5 billion are awaiting approval for their IPOs from the Securities Board. This includes companies like Reliance Spinning Mill and Jagdamba Steel, which are seeking approval for their IPOs.

Additionally, 12 companies are in the process of preparing rights shares valued at NPR 13.37 billion, with Ghalemdi Hydropower having already obtained approval for rights shares worth NPR 1 billion 10 million.

The board’s decision to delay public offerings, particularly in the hydropower and insurance sectors, may impact companies’ ability to meet capital requirements and settle their bank loans. The market is closely watching how this move will influence the business landscape.